In a recent press conference held in Beijing on November 8, 2024, Lan Fo’an, China’s Finance Minister, expressed that the nation has substantial room to adapt its fiscal policy in response to both domestic and international uncertainties.
Responding to queries at China’s annual parliamentary conference, known as the “Two Sessions,” Lan Fo’an shed light on the nation’s proactive fiscal strategy for the year. This conference occurs in a climate of increasing trade tension, with the United States having recently raised tariffs on Chinese goods twice in approximately a month. In response, China has imposed targeted taxes and restrictions on American firms.
China revealed on Wednesday that it plans to raise its on-budget deficit to 4% of its GDP, a figure not seen since at least 2010. Furthermore, the government aims to issue special treasury bonds worth 1.3 trillion yuan ($178.9 billion) in 2025. This marks an increase of 300 billion yuan from the previous year, primarily aimed at supporting the consumer trade-in program.
Additionally, China intends to issue 4.4 trillion yuan of local government special-purpose bonds this year, an increase of 500 billion yuan from last year. This move is designed to alleviate the financial burdens of local authorities.
Increasing consumer spending is at the forefront of China’s priorities for the upcoming year, as outlined in a government work report shared on Wednesday. Zheng Shanjie, the head of the National Development and Reform Commission, stated that a comprehensive plan to stimulate consumption is in the works and will be released shortly.
China also announced its aim to achieve a GDP growth rate of approximately 5% this year, while simultaneously decreasing its inflation target to 2% – the lowest it’s been in roughly two decades.
Aaron Costello, the Head of Asia at Cambridge Associates, acknowledges that while China’s plans to stimulate growth align with expectations, the country faces challenges in the form of low business and consumer sentiment. Encouraging signs, such as Chinese President Xi Jinping’s recent meeting with tech entrepreneurs, signal a push for private business growth.
Trade tensions continue to rise, with officials highlighting that achieving the 5% GDP growth target will be a challenging task. China’s economy grew by 5% last year, bolstered by robust exports that counterbalanced weak consumption and a struggling domestic real estate sector.
When questioned about U.S. trade tensions, Minister of Commerce Wang Wentao called for discussions between the two nations, while reinforcing Beijing’s strong stance on the matter. Meanwhile, the U.S. has imposed restrictions on several major Chinese tech companies, limiting their access to advanced semiconductors essential for training artificial intelligence models.
Undeterred by these challenges, Zheng emphasized that pressure and restrictions will only drive China to innovate independently, particularly in areas such as integrated circuits and robotic development. China’s central bank chief, Pan Gongsheng, added that while foreign investors are welcome, the nation opposes the establishment of unjust investment barriers.
